Mutual fund : What is FATCA ?

If you are a mutual fund
investor, you must be getting messages from your distributor or fund house,
requesting you to be FATCA compliant before the deadline of April 30, 2017.

1. What is FATCA?

FATCA, or the Foreign
Account Tax Compliance Act, is a US tax initiative that requires all financial
institutions, including Indian mutual funds, to re port financial transactions
of US persons, or entities in which US persons hold a substantial ownership, to
relevant tax authorities.

The purpose of FATCA is
to encourage better tax compliance by preventing US citizens from using financial institutions outside their home country to avoid domestic taxation laws.

2. What do mutual fund
investors have to do?

All individuals and
entities who have opened mutual fund folios between July 1, 2014 and August 31,
2015, need to submit the FATCA self-certifications by April 30, 2017.

In case self-certifications are not submitted, such folios should prohibit the unit holder from
effecting any further transactions.

While many individuals
are already compliant, it is possible that some information has not been
fully captured or investors have missed something.

Hence, investors check
to confirm if they are FATCA-compliant.

3. Why is this law
applicable to mutual fund investments?

The government of India
and the US have reached an agreement on the terms of an Inter-Governmental
Agreement (IGA) to imple ment FATCA and India is now treated as having an IGA
in effect from April 11, 2014.

Indian mutual funds are required to share
financial accountasset informa tion of account holders who are US tax
residents.

Investors are expected
to pro vide details such as country of tax residence, tax identification number
from that country , country of birth, country of citizenship, etc at the time
of initial investment or opening the folio.

In case of
non-individual investors, the above mentioned information of any of the
controlling persons will have to be submitted. If you have been paying taxes in
any country apart from India, you need to provide the tax identification number
or any such number equivalent to the PAN here.

Mutual fund : What is FATCA ?
Reviewed by S. Chitra
on
April 30, 2017
Rating: 5 Mutual fund : What is FATCA in MFs? If you are a mutual fund investor, you must be getting messages from your distributor or fund house...